Chrysler Capital Ram Lease Impossible to Trade at Lease-End w/Equity

[HOSTAGE81]

Anyone currently leasing or thinking about leasing, Ram or otherwise, needs to read this and understand it, as thousands of dollars in your real money could be lost.

I've leased quite a few vehicles over the years. Mostly Ram 1500 trucks, but also Chrysler cars and Lexus. I've never had a problem getting a deal done to my satisfaction and have been happy with all lease-end outcomes. Until now !!

I have the 2021 silver Bighorn in my photo here. I just made the last of 36 lease payments yesterday. So nothing more is owed and I am now in my final 30 days with this vehicle.

I can, of course, buy it for the Stated Residual Value in the Lease Contract. I have never bought a leased vehicle at lease-end. I have also never turned one back in and paid a fee to do so.

What I have done in each of my own circumstances, is to TRADE the vehicle in on my next lease as I have always had decent equity in the vehicle.

The 2021 has a Residual Value of $30,375.00. The vehicle is in like new condition after 3 years with ONLY 8,460 MILES. Online trade appraisal quotes are 35 to 37,000 dollars.

So the EQUITY would appear to be $6625.00 on the higher end and $4625.00 on the lower end. At any rate, this is decent equity going into another lease. My 2019 Ram with only 13,000 miles had $10,000. equity all going into the 2021 lease. My '21 msrp was $53,200. / capitalized costs reductions of $13,900. and an amazingly low monthly payment of $324.72 ! This is why people lease IF YOU CAN LIMIT WEAR&TEAR and keep your miles under 10,000 per year, sense can be made of it.

Today I find out from Chrysler Capital and while at the dealer to lease a 2025 1500 Crew and with the new 3.0L Hurricane, (the test drive was amazing! With this, I would not miss all my 5.7 Hemi's of the past!) that the dealer cannot take the vehicle in trade using the Residual Value as a Payoff.
Explained to me that the dealer has to obtain Chrysler Capital's determination of "Fair Market Value". It no longer makes any difference what the Residual is. So forget 30K, Chrysler says the new adjusted LENDER PAYOFF IS $37,000. !!

The dealer appraisal is $34,000. and that gives me $3,000. NEGATIVE EQUITY!! VS WHAT COULD HAVE BEEN $6600. POSITIVE EQUITY!!

Iam learning that under this fair market value adjustment, virtually NO ONE will ever again realize Trade-In EQUITY in a Lease!
All trade-in's will carry over negative equity.

The Fair Market Values from the Lenders will look more like and be closer to a DEALER RETAIL VALUE! And for this reason, the dealers really don't want to see these vehicles traded because they own it at a number difficult to show a profit on the front end while being totally dependent on a back-end of finance, warranties, dealer accessories.

There are no disclosures that will inform the lease customers of these things upfront at the time of signing the paperwork.
People are not going to know of this until that day when the lease is done and they think they have a trade-in with EQUITY!
RE: PEOPLE LIKE ME.

Be mindful that you can't trade it; if you attempt to private sell it, you are subject to the same Lender Imposed Payoff. You will be limited to either buying it for the Residual or just simply turning it back it and paying a fee to do that.

A lot of people will be finding that they have Leased their Last Vehicle!

I completely understand what you're talking about as I owned about 67 vehicles and been playing this game for years with equity and it had been very lucrative money when it comes to leasing. Leasing gives so many options if one knows how to play the game. I now shifted to leasing only from honda and toyota as their residual value is much lower than American brands, which gained me more money with no liability.

You could buy the lease and try to sell it but that's risky as you will have to pay the taxes, safety the vehicle, and gamble on selling it privately to get a profit. You'll have to deal with the headache of selling to window shoppers, which is something I hated.

Or you can try find a buyer in your last 30 days and sell at an agreed price and go to dealer together and you get the difference.

Or you can find a second dealer that wants your vehicle and you can arrange for a "deal of convenience" with first dealer so you can save the taxes and gain equity on a new brand you want. This strategy is not talked about often but works. I just did it with a corvette.

These dealers are ****. They don't want to see anyone but them gain.

 

[HOSTAGE81]

The buyout should all be in the original lease agreement, unless the OP signed a contract that said "we can charge you whatever we want at the end of this" then it's set in stone at the original time of purchase. That's one of the benefits of a lease, it removes some risk from your side of the equation. Value tanks, let it go. Value is better than residual, buy it out and sell it/trade it.

I'm not following the OP either, you can't trade a leased vehicle any more than you can sell a rented house. You have to buy the lease out to gain ownership, then transfer ownership to the dealer. Obviously the dealer generally just holds the vehicle, has you do a limited power of attorney, and handles all that for you.

OP is not talking about the buy out ie.residual. he is talking about the market value vs Residual. The difference benefits him financially which gets rolled in next lease to make payments lower etc. But since Ram is not doing well. They are capping prices.

No disrespect but you can trade a lease anytime you want within the lease. You don't have to wait till term is over either. You don't have to go your own Ram dealer either. You can go to any Ram dealer at any point. To make it more confusing, the evaluation is always different, too. The difference in what you have left over of your payments is subtracted from potential equity if any.

I'll give a quick example. I took a lease for civic for my wife. I knew Residual would be very low compared to market value because its a honda. I took 4 year lease. The payment was stupid low. Anyway at end of year three which was last month, I went back to the honda dealer and said you want to buy my lease. Vehicle was three years old with about 40k mileage. No damage. I shopped at several honda dealers. One dealer gave me 6500 cheque on the spot because the market value was very high. I took that and played the game again. Obviously I didn't tell my wife and told her we took a loss lol.

You can't do it on every car. It's only a handful of vehicles it works on but leasing is something really worth it if one knows the game.

 

[Sherman Bird]

Anyone currently leasing or thinking about leasing, Ram or otherwise, needs to read this and understand it, as thousands of dollars in your real money could be lost.

I've leased quite a few vehicles over the years. Mostly Ram 1500 trucks, but also Chrysler cars and Lexus. I've never had a problem getting a deal done to my satisfaction and have been happy with all lease-end outcomes. Until now !!

I have the 2021 silver Bighorn in my photo here. I just made the last of 36 lease payments yesterday. So nothing more is owed and I am now in my final 30 days with this vehicle.

I can, of course, buy it for the Stated Residual Value in the Lease Contract. I have never bought a leased vehicle at lease-end. I have also never turned one back in and paid a fee to do so.

What I have done in each of my own circumstances, is to TRADE the vehicle in on my next lease as I have always had decent equity in the vehicle.

The 2021 has a Residual Value of $30,375.00. The vehicle is in like new condition after 3 years with ONLY 8,460 MILES. Online trade appraisal quotes are 35 to 37,000 dollars.

So the EQUITY would appear to be $6625.00 on the higher end and $4625.00 on the lower end. At any rate, this is decent equity going into another lease. My 2019 Ram with only 13,000 miles had $10,000. equity all going into the 2021 lease. My '21 msrp was $53,200. / capitalized costs reductions of $13,900. and an amazingly low monthly payment of $324.72 ! This is why people lease IF YOU CAN LIMIT WEAR&TEAR and keep your miles under 10,000 per year, sense can be made of it.

Today I find out from Chrysler Capital and while at the dealer to lease a 2025 1500 Crew and with the new 3.0L Hurricane, (the test drive was amazing! With this, I would not miss all my 5.7 Hemi's of the past!) that the dealer cannot take the vehicle in trade using the Residual Value as a Payoff.
Explained to me that the dealer has to obtain Chrysler Capital's determination of "Fair Market Value". It no longer makes any difference what the Residual is. So forget 30K, Chrysler says the new adjusted LENDER PAYOFF IS $37,000. !!

The dealer appraisal is $34,000. and that gives me $3,000. NEGATIVE EQUITY!! VS WHAT COULD HAVE BEEN $6600. POSITIVE EQUITY!!

Iam learning that under this fair market value adjustment, virtually NO ONE will ever again realize Trade-In EQUITY in a Lease!
All trade-in's will carry over negative equity.

The Fair Market Values from the Lenders will look more like and be closer to a DEALER RETAIL VALUE! And for this reason, the dealers really don't want to see these vehicles traded because they own it at a number difficult to show a profit on the front end while being totally dependent on a back-end of finance, warranties, dealer accessories.

There are no disclosures that will inform the lease customers of these things upfront at the time of signing the paperwork.
People are not going to know of this until that day when the lease is done and they think they have a trade-in with EQUITY!
RE: PEOPLE LIKE ME.

Be mindful that you can't trade it; if you attempt to private sell it, you are subject to the same Lender Imposed Payoff. You will be limited to either buying it for the Residual or just simply turning it back it and paying a fee to do that.

A lot of people will be finding that they have Leased their Last Vehicle!

Gee! I wonder if old Dave Ramsey was correct! Uh, yeah! DON'T Lease! On the other hand, I HAVE bought lease turn ins from Credit Unions and gotten very good deals..... The CU's ARE NOT in the automotive business.... thus they want to get rid of that depreciating liability ASAP!

 

[Scottly]

There's retail value...and there is residual value. Dealers don't trade off retail, they use wholesale. In the past, I'm sure that there may have been liquidity in the difference of residual and trade value, but not today. He just learned that.

 

[tron67j]

I am another who is confused by lease terms identified here that "make people money". The value in a vehicle is keeping it long term and spreading the depreciation over the long term and minimizing car payments that actually pay that depreciated value to the bank during a purchase or lease period.

An example is if a vehicle is leased at $50k for 36 months at 7% interest with a money factor of .00208. If the residual value is $24k the cost to lease is about $33,740 and if buying outright at end of lease total cost of everything is $59,400 versus a total cost of $57,400 if the vehicle was purchased outright for a similar payment period and interest rate. So in this scenario the person leasing is $2k in the hole leasing over buying. Not going into the whole get another buyer/sell to another dealer/etc. discussion as there are too many variables. Sticking to just terms of lease and options to turn in and buy at agreed to residual value.

But for the OP, a better negotiation to value the truck at say $28k at end of lease due to low mileage would have resulted in a cost to lease of $29,800 and this is where the value is. If they walked away from the lease at end then OP would have paid about $4k less over lease period, which is saving mostly financed depreciation. So a bad upfront calculation of how the truck would be used cost OP a lot of money. This is one thing that a person leasing MUST GET EXACTLY CORRECT, how many miles will you put in the vehicle and what condition will the financial institution say the vehicle is in at return. This is another problem as the the institution can say that wear and tear is excessive and charge additional money to close out lease. I know people will say "I can't possibly know exactly how many miles exactly will be on the vehicle, nor know if someone will damage it just before it is returned". Well, you better, because the financial institution is assigning those exact values in the terms and have an out to charge you more if you don't stay at or under those terms.

 

[Scottly]

Just an FYI for those that quote Ramsey, telling people not to lease...He does that because he tells people not to buy new, because the first two years is where you experience the most depreciation(theoretically). A lease amplifies that because you absorb the depreciation and have NOTHING at the end. Ramsey believes you should buy used, pay cash, and drive it until it dies. I'm not a Ramsey worshiper but I believe he can help people with spending problems. Me...I buy new and trade every two-three years. I can afford it and I'll never be convinced that leasing is a better way to go, if you buy right and trade right. But that's just me. You do you.

 

[Docwagon1776]

No disrespect but you can trade a lease anytime you want within the lease. You don't have to wait till term is over either.

Right, I covered that earlier, the lease is bought out then the vehicle can be traded. If there's early buy out fees or not is in the contract.

I bought my wife's car via lease then paying it off at 13 months because there were lease incentives not available outside of a lease so it saved $1k to do it that way vs paying cash at time of purchase.

 

[Docwagon1776]

I am another who is confused by lease terms identified here that "make people money".

To be cheaper, there either needs to be lease specific kickbacks that aren't otherwise available *or* you need to be in the position to claim the lease payments on your taxes. If you're operating a business, the entire lease payment is a business expense and it's both easy to track and easy to claim vs claiming depreciation on an owned vehicle.

As an historical aberration, people were literally making money on leases when supply chain crunches drove used car prices up. Lease a relatively high demand car, let the used car value rise past what you had paid so far plus the buy out, sell. Guys were making thousands of dollars flipping certain models. That's far from the norm, though, and I doubt we ever see that sort of inversion again in my lifetime.

 

[Sherman Bird]

Just an FYI for those that quote Ramsey, telling people not to lease...He does that because he tells people not to buy new, because the first two years is where you experience the most depreciation(theoretically). A lease amplifies that because you absorb the depreciation and have NOTHING at the end. Ramsey believes you should buy used, pay cash, and drive it until it dies. I'm not a Ramsey worshiper but I believe he can help people with spending problems. Me...I buy new and trade every two-three years. I can afford it and I'll never be convinced that leasing is a better way to go, if you buy right and trade right. But that's just me. You do you.

I'm not a Ramsey "Worshipper". I Also could quote from Johnathon Pond, a Ramsey Predecessor, but that would be redundant.
...And, it isn't about being able to afford it. It's about a different mindset than that. We all have our posits on the subject!

The book "The Millionaire Next Door" goes into excruciating details about these different scenarios! Peace!

 

[Sherman Bird]

I am another who is confused by lease terms identified here that "make people money". The value in a vehicle is keeping it long term and spreading the depreciation over the long term and minimizing car payments that actually pay that depreciated value to the bank during a purchase or lease period.

An example is if a vehicle is leased at $50k for 36 months at 7% interest with a money factor of .00208. If the residual value is $24k the cost to lease is about $33,740 and if buying outright at end of lease total cost of everything is $59,400 versus a total cost of $57,400 if the vehicle was purchased outright for a similar payment period and interest rate. So in this scenario the person leasing is $2k in the hole leasing over buying. Not going into the whole get another buyer/sell to another dealer/etc. discussion as there are too many variables. Sticking to just terms of lease and options to turn in and buy at agreed to residual value.

But for the OP, a better negotiation to value the truck at say $28k at end of lease due to low mileage would have resulted in a cost to lease of $29,800 and this is where the value is. If they walked away from the lease at end then OP would have paid about $4k less over lease period, which is saving mostly financed depreciation. So a bad upfront calculation of how the truck would be used cost OP a lot of money. This is one thing that a person leasing MUST GET EXACTLY CORRECT, how many miles will you put in the vehicle and what condition will the financial institution say the vehicle is in at return. This is another problem as the the institution can say that wear and tear is excessive and charge additional money to close out lease. I know people will say "I can't possibly know exactly how many miles exactly will be on the vehicle, nor know if someone will damage it just before it is returned". Well, you better, because the financial institution is assigning those exact values in the terms and have an out to charge you more if you don't stay at or under those terms.

After being able to "afford" that new truck, and being throttled by the financial nose to Ford Motor Credit on my last new vehicle, I Refinanced my truck through a credit union at much more favorable terms. After it was paid off, I decided to do the Ramsey thing and bought an old "Hoopty". Since then, I've "horse traded" up to an older low mileage Lexus RX. All my vehicles are paid for, I carry less insurance than is required by a lender, and I do not suffer the devastating losses that do not seem real because these losses are a conceptual thing on paper. Problem is, the piper has to be paid sooner or later. I merely chose for me, to get out of the perpetual debt cycle concerning depreciating property while still alive!
I respect everyone else's decisions and their rights thereto.

 

[62Blazer]

It's been a long time since I leased a vehicle, but as mentioned in a previous post the climate around used car values varies drastically over the years. In recent years the used car value has sky-rocketed so the retail value is often higher than the residual value, but that was not always so. Both myself and the wife leased cars at about the same time many years ago. After the 3 year lease term was up we were both interested in buying out the cars. However the buy out value was actually higher than the retail price (actual used car value) was for both of them....meaning we could just turn in the vehicles and then buy an equivalent different used vehicle for thousands of dollars less. This was even at the same larger dealership. They would not negotiate a lower buy out price on the lease vehicles we had, but I could walk across their lot and pick out a basically identical used version cheaper (they had a bunch of lease turn in vehicles).
I guess the thing I don't understand is how you can have true "equity" in a leased vehicle? Isn't this the same as renting a house. When you first move in to the rented house the market value is say $150,000 but when you move out 3 years later that house is now worth $200,000. You don't go and say you have $50k in equity for the house you rented....right?
I don't really think there is anything wrong with leasing a vehicle. Don't think it's generally the absolute best thing to do if you only consider the long-term financial impact.....but if you can afford it and want a new vehicle every few years than it can make sense. It's not the choice I go with as I keep my vehicles for a long period of time and avoid monthly payments, but to each their own.

 

[photoguynorth]

To be fair to the OP, even though there is so real equity on a leased vehicle, you could consider the difference between contract buyout and the current real value as equity (assuming it is worth more than the buyout price). Of course, you need to be able to purchase it in order to sell and realize the profit, which is not always possible or worthwhile.

 

[Silver21Ram]

OP is not talking about the buy out ie.residual. he is talking about the market value vs Residual. The difference benefits him financially which gets rolled in next lease to make payments lower etc. But since Ram is not doing well. They are capping prices.

No disrespect but you can trade a lease anytime you want within the lease. You don't have to wait till term is over either. You don't have to go your own Ram dealer either. You can go to any Ram dealer at any point. To make it more confusing, the evaluation is always different, too. The difference in what you have left over of your payments is subtracted from potential equity if any.

I'll give a quick example. I took a lease for civic for my wife. I knew Residual would be very low compared to market value because its a honda. I took 4 year lease. The payment was stupid low. Anyway at end of year three which was last month, I went back to the honda dealer and said you want to buy my lease. Vehicle was three years old with about 40k mileage. No damage. I shopped at several honda dealers. One dealer gave me 6500 cheque on the spot because the market value was very high. I took that and played the game again. Obviously I didn't tell my wife and told her we took a loss lol.

You can't do it on every car. It's only a handful of vehicles it works on but leasing is something really worth it if one knows the game.

As the OP, yes I do understand Leasing, I have leased many vehicles including from my own dealerships. I have approved a few hundred lease contracts in Ford and GM stores.
But I am retired now, I still lease my vehicles and I don't walk in and announce that I was in the car business for 40 years.
They soon figure it out on their own after I've had my fun with them!

My original post is regrettable to me because it was all 100% based on info received from one CDJR dealership that I was not familiar with.

What I described is what this dealer is doing when there is a leased vehicle involved.

Please know, with a lease, at lease end or earlier, you can "turn it in and walk away but pay a fee". ( mine would have been $395.00).

Or you can obtain a payoff from the lease lender, and sell it outright yourself. People do it when they want out earlier but can save a bit without having to pay the higher costs of an early turn-in.

Or you can buy it and own it by paying the predetermined price in the Lease Contract that is stated as a Residual Valve. It is a set in stone price. It's the Residual plus any payments that you may still owe. You won't be subject to 1) any fees, or 2) any wear/tear charges because you are buying it as is with any remaining warranty.

Or you can trade it in if there is any equity.

Yes. TRADE- IN A LEASED VEHICLE PEOPLE!!!
REMEMBER, YOU CAN OWN IT FOR THE RESIDUAL.
YOU CAN GET ANY DEALER TO APPRAISE YOUR LEASE. IT MAY BE WORTH MORE THAN THE RESIDUAL!
It's worth more if you can get an appraisal or offer for it that is simply more than the Residual.

My Residual was 30K.
My Appraised Valve (or "how much are you giving me for my trade?" price) was 37K.
MY EQUITY, YES EQUITY IS $7,000.00 !!

The equity in my 2019 was 10K !
The truth be, I've had equity in all my leases.
I have never turned one in, or bought one at Residual Value.

What I reported in my original post here was total BS from one particular dealer who even put it in writing about adding my equity back to the Residual to calculate a true and accurate payoff. Not so !! Dealers do lie.

The photo is my new 2025 Ram 1500 Bighorn Crew with the new 3.0L TwinTurbo "Hurricane"

 

[Silver21Ram]

Typo: it may be worth more than the RESIDUAL ( * Not used vehicle appraisal)

 

[Silver21Ram]

I bought the 2025 the following day at a different dealer.
I did not mention anything to the second dealer that had taken place at the first dealer.

 

[tron67j]

To be cheaper, there either needs to be lease specific kickbacks that aren't otherwise available *or* you need to be in the position to claim the lease payments on your taxes. If you're operating a business, the entire lease payment is a business expense and it's both easy to track and easy to claim vs claiming depreciation on an owned vehicle.

As an historical aberration, people were literally making money on leases when supply chain crunches drove used car prices up. Lease a relatively high demand car, let the used car value rise past what you had paid so far plus the buy out, sell. Guys were making thousands of dollars flipping certain models. That's far from the norm, though, and I doubt we ever see that sort of inversion again in my lifetime.

Yes, there are permutations where it makes sense, I haven't dealt with business issues in years so I don't attempt to discuss them. And that aberration during COVID made sure dealers "fixed" that issue. That's why I just focused more on the every day leasee in my post.

 

[PowrRam]

Or you can trade it in if there is any equity.

Yes. TRADE- IN A LEASED VEHICLE PEOPLE!!!
REMEMBER, YOU CAN OWN IT FOR THE RESIDUAL.
YOU CAN GET ANY DEALER TO APPRAISE YOUR LEASE. IT MAY BE WORTH MORE THAN THE RESIDUAL!
It's worth more if you can get an appraisal or offer for it that is simply more than the Residual.

Incorrect. It's not your equity. It's your POTENTIAL equity. You don't own the vehicle, the lease company owns it. The dealer may tell you there is "equity" in the vehicle but it's not your equity until you own the vehicle. But dealers have a way around this. Here's how it works...

The dealer says you have equity in your leased vehicle which you can use to bring down the payments on a new lease. You price out a new lease and the payments will be $650 a month for 36 months with $0 down. However, if you "trade in" your leased vehicle they can reduce the $650 per month payment to $575. Hey, that sounds like a great deal!

Is it?

On your current vehicle you said:

The 2021 has a Residual Value of $30,375.00. Online trade appraisal quotes are 35 to 37,000 dollars. So the EQUITY would appear to be $6625.00 on the higher end and $4625.00 on the lower end.

This "equity" would be the going market price minus the lease buyout price, IF YOU WERE TO PURCHASE THE VEHICLE. But you're not buying the vehicle. The only way to realize this "equity" would be if you were to buy the vehicle, and then re-sell it. Instead the dealer is willing to buy the vehicle from the leasing company for $30,375 and put it on their lot for, say, $39,900. Meanwhile, they're going to "give" you $75 off their quoted lease price of $650 a month, for a lease $575 an month. But over 36 months that $75 amounts to $2,700 total. If they sell the vehicle for $39,900 and they "bought" it for $30,375 and took a $2,700 discount on a new lease, they still come out way ahead.

There is nothing in a contract that says the dealer has to give you the difference between the residual value and the market value of the vehicle. That's up to you to get if you BUY THE VEHICLE. (You also get to pay the sales tax if you do this.) They will sometimes discount a lease if you are re-leasing a new vehicle from them. But realize you are not turning in the vehicle at lease end, behind the scenes the dealer is buying the vehicle from the leasing company.

 

[Docwagon1776]

Yes. TRADE- IN A LEASED VEHICLE PEOPLE!!!
REMEMBER, YOU CAN OWN IT FOR THE RESIDUAL.

We all know that, and that's why your initial post made no sense, hence all the questions. Post #3: What keeps you from buying the lease out for the residual and then trading it to get the $7k you think the difference will be?

If you've been in the car business for so long, I'm surprised you didn't realize the dealer was just trying to steal your "trade". Which dealer was that scummy?

 

[Scottly]

Which dealer was that scummy?

Most of them

 

[mdc1990zr1]

you may be right, I read it again, now maybe a little clearer, in the past he got money for trade, now he has negative equity, meaning my guess is he can turn in the truck and wash his hands, but no money for a trade. Now, I almost feel sorry for the banks, lol. I surrender, maybe I should avoid posts with too many big words.

Don't feel sorry for the banks. They used to have a form of "gap" insurance in case they lost money on the vehicle when it went through the auction.